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General Elections: Three-Way Tussle
India’s month long General Elections, which
will decide the political framework of the next government, is turning
out to be a three-way contest.
The tussle for power used to be bi-polar one
between the two largest national political alliances, the Indian
National Congress led United Progressive Alliance (UPA) and Bharatiya
Janata Party (BJP) led National Democratic Alliance (NDA). Now this
has turned to be three-way one with a Third Front, comprising of the
Communist Parties and smaller regional parties, presenting another
alternative. An emerging power broker is likely to be the Bahujan
Samaj Party (BSP), representing low-caste interests, that runs the
state government in India’s largest province Uttar Pradesh. It is
likely to win significant seats.
The
Communist Parties emerged as a prominent force following their
intense opposition to the Indo-U.S. Civil Nuclear Agreement that
threatened the survival of India’s ruling coalition government of
the United Progressive Alliance (UPA) last year.
This three way contest, however, has a
bi-polar implication. On the one hand, the UPA and the NDA alliances
have the experience of successfully running a National Government that
propelled India to grow its Gross Domestic Product (GDP) more than 9%
in recent years. On the other hand, the inexperienced Third Front has
never been able to provide a stable government having only ever been
in power for less than half of any full five-year term. Moreover, they
are likely to be less inclined to open up India’s economy that has
been turbo-charged over the past decade. Election results are due to
be announced on May 16th.
Both the Congress and BJP led governments have
successfully accelerated India’s GDP growth rate to about 7% today
from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year
2006-07 before slowing down on account of the worldwide recession.
Revival Trends: India Shining
If
historical patterns are anything to go by, the voting in of the 15th
Lok Sabha or the House of the People, the directly elected lower house
of the Parliament of India, will mark a starting point for a sharp
ramp-up in economic activity for the country. Economic activity, as
measured by industrial production index, had increased immediately
after five elections out of seven polls since 1984, as political
stability provided a platform for economic growth.
Economic
activity has risen consecutively following the last three elections
held on 1998, 1999 and 2004. A
comparison of industrial production (IP) data before elections and six
months after elections, shows that on five occasions, the IP index
rose by 20-80 basis points, according to data from Goldman Sachs
Global ECS Research.
The Interim
Budget for the financial year 2009-10 announced in February by the
Finance Minister of the ruling United Progressive Alliance (UPA),
focused on infrastructure development, easing of Foreign Direct
Investments (FDIs) norms and economic stimulus packages that set the
ground for how the alliance was approaching the General
Elections.
The new Government that comes in to power
would be best served if it continued and augmented the “India
Shining” policies that currently sustain a Gross Domestic Product
(GDP) growth of more than 7% as India continues to defy negative GDP
growth seen in many Western economies.
Such growth initiatives have led to an
economic revival in key sectors like steel, cement, automobile, food
and beverages and fast moving consumer goods (FMCG) (See Vol
4 | Issue 3 ‘Clearing The FDI Highway’) that are best not
derailed.
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